Be brave: Take action to boost recovery

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Profitability is the hot topic of the moment as airlines strive to rebuild sales and lock in new revenue streams in the face of yet more Covid-19 restrictions. As the reality of a recovery dawns, the question dominating many supplier minds is: Are the key decision-makers really brave enough to build back better? Julie Baxter reports

Many experts in the midst of critical conversations around returning food and beverage, retail and digitisation note a worrying dilemma. Airlines see the potential of change but are in a precarious financial position. They are fearful of being the first to move to a new way of doing things because of the investment already sunk into current infrastructure and the risk that innovation won’t reap the rewards anticipated.

The markets have changed and new ways of working seem essential to reduce the duplication, waste and missed opportunities but which organisations have the courage to make that change, rather than just hoping familiar old ways will return? Many are asking: “Has the customer changed post-Covid” but perhaps the real question should be: “Have the airlines changed?” Are they ready to do things differently?

Kai Kosicki, founder of Expair, says: “Aviation is a very conventional industry. Just think of all the many innovative blueprints for seating people

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differently. Many have advantages but still all aircraft cabins look pretty much the same. No one is brave enough to radically reconfigure in case passengers reject it, and it is too hard to go back.”

But as we focus on finding new revenue streams, radical change in inflight service operations seems essential. Lance Hayward, The Hayward Partnership, says: “Radical change only happens when we have a burning platform and right now we do have a burning platform. Aside from domestic schedules, volumes have plummeted by almost 70% and recovery forecasts are uncertain. "On the plus side, rapid technological advancement and a shift in the consumer mindset have created opportunities to significantly improve efficiency and effectiveness and build meaningful consumer relationships through digitisation. This can help us really understand and deliver what is most important: choice, convenience, price, immediate fulfilment, and care for the planet.

“From the change perspective airlines need to act now to embrace new ways of working. It is tempting to cling to the hope that numbers will return and we can revert to old systems, but do that and we miss the opportunity for a radical step change in terms of operations, efficiency and profitability. I urge organisations to make a decision to change, to make the most out of this unexpected Covid-19 shake-up and come out of the pandemic with a better future. Now is the time to better join the dots and find the courage to establish and follow a new collaboration model.”

Michelle Green, at Tourvest, agrees: “The time to change radically is now. The devastating effects of Covid-19 has forced the industry to stop and reassess. Customers understood things had to change and that opened the door for airlines to introduce new ways of being. Customers have excepted reduced ranges, touchless solutions, QR codes, digital brochures and ordering apps and these all allow them to purchase when they want. rather than only when a trolley passes. Wider preordering choice also added convenience for the considered purchaser who plans ahead.

“These changes are the start of a new digital solution that allows airlines to tap into customers throughout their decision-making journey, offering them the right products at the right time, on the right device. The data analytics also allow the airline and retailer to reduce waste, pack dynamically and improve the customer experience. "Digital enhancement is still fairly new and costly, especially when tapping into airline legacy systems and transition takes time, but I remain optimistic that more airlines will accept and embrace change, and drive new solutions for the future. Having said that, it does feel like many airlines are currently moving cautiously and almost waiting for someone else to make a large step forward and test the water first. The trouble is if we wait too long and passenger numbers do return, it will potentially be harder to change. We will have lost our opportunity to build a new future-proof operating model that could also drive considerable revenue opportunities, encourage collaborations, and capture both impulse and considered purchasers pre, post and in flight.”

As suppliers support a profitable recovery our Get Onboard Now! Profits Action Group looked at the key areas along the customer journey where inflight service could help if done differently…

PRE-ORDER

Pre-ordering seems like the dream solution to improving choice and cutting waste but the pick up rate is often as low as five per cent. It currently lacks immediacy and is often hidden deep within an airline’s website. The systems are not yet really dynamic and don’t scale up well enough to be of significant practical help in many cases. The amount of waste generated and food returned continues to show wrong decisions are being made on ordering – decisions are not based on data. Bottom line thinking: Done well, pre-order can and will increase customer satisfaction by delivering what passengers really want. It can provide revenue through opportunities to upgrade meal options and add non-standard beverage items, but it needs to be strongly promoted. The concept is brilliant but it needs to be better positioned to get the take-up. Push the benefit of greater choice – front and centre – and take-up will grow.

I urge organisations to make a decision to change, to make the most out of this unexpected Covid-19 shake-up

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Currently the airline IT landscape is very fractured, different suppliers for buy-on-board, catering management, logistics all with different tech systems so airlines spend more on managing their IT systems than they should have to. If you simplify and integrate systems and make strategic decisions on where you want passengers to order, usage will increase.

ONBOARD CONNECTIVITY

There are now many ways to provide connectivity onboard but how much revenue do these expensive systems bring in? Connectivity costs a lot to offer but the transaction rates currently seem low. Opportunities come with connectivity but you may question - does it really make much difference to profits if a passenger buys through a printed catalogue or via an app? Likewise with entertainment – many younger travellers have already downloaded their choices before they board and rarely pay for gaming unless they are bored. Bottom line thinking: Low cost carriers obviously use wifi connectivity to monetise the journey, selling the connection or devices. But more importantly digital products can allow airlines to offer passengers what they want, when they want it, and that can change the service model. Ultimately, connectivity gives an airline added-value opportunities all along the passengers’ decision-making journey, and the ability to sell to them in different ways to suit their mood – whether they plan ahead or are impulsive buyers.

The passenger can also tailor-make their own journey and this gives the airline the opportunity to add choice, without adding complexity, waste or weight. This in turn opens up revenue avenues and supports sustainability.

Kosicki says: “As onboard internet opens up operational efficiencies and crew support, it will also create a completely new way of doing business. Internet onboard gives you access to the people, the most important thing you can have. Getting their attention and interacting with them – that is the difficult part. "Imagine a world with new business models where this access allows you to offer partnerships - passengers, for example, could receive a free sandwich in exchange for a five minute chat with an insurance agent or a credit adviser. If you can segment the people you are talking too, that provides a rare and valuable opportunity.”

DATA DANGERS

‘Data is king!’ is a common cry, but in truth getting the data is just part of the potential value, more critical is how you bring that data together within your organisation and use it. Many airlines don’t in fact know their clients that well, passengers book through many different channels, and those distributors may have more information than the carrier themselves. Bottom line thinking: Airlines need to find ways to collaborate that do not jeopardise their data. Many are anxious data sharing will backfire on them, especially if they don’t have good control over it or use it unwisely. Data offers routes to revenue but has to be handled carefully, by specialists, to ensure it is not used to just bombard and annoy customers. It is only useful when it adds value.

RETAIL SALES

The onboard environment is not a good retail environment – but passengers are a group of people with a greater propensity to buy than if they were just receiving a cold marketing message elsewhere. It is access to the wider market that is the real value around retail sales. Bottom line thinking: A digital retail offer adds value throughout the passengers’ decisionmaking journey. You can sell to them in different ways to suit their mood. Michael Raasch, Omnevo, says: “It is very easy to quickly lose a digital customer especially post-pandemic when they have all got used to online retailing. Passengers expect Amazon levels of efficiency and airlines are under pressure to perform as fast, which is hard. Our team designs large scale e-commerce platforms for retailers and from that experience, we realize the key problem for airlines is that they just don’t really know how their digital retail programmes should look. Do them well and they will be well rewarded.“

EXPANDING CHOICE

Airlines make most revenues when they find ways to offer the most choice. Extending the ways passengers can buy more from you, more often, can increase revenues, loyalty and satisfaction.

Data offers routes to revenue but has to be handled carefully, by specialists, to ensure it is not used to bombard and annoy customers

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Bottom line thinking: Once you can see what is chosen by those given choice, you have powerful information to improve efficiency. This information enables you to go back down your supply chain and redefine your offer. It enables you to cut cost, waste and complexity in the system.

ORGANISATIONAL CHANGE

The biggest obstacle to radical change seems to be internal. At the core of digital transformation is the ability of managers to shape their organization and allow for agile new ways of working, ways that ensure new products develop, new responsibilities/ownership are established, and a culture of innovation is nurtured. This has to come from within and requires leadership.

The race is on – how fast can business leaders transform the organisation and eliminate the established silos. The process began with customer experience teams and crossfunctional working connecting departments to put the customer first. Bottom line thinking: The next step is customer experience PLUS digitalisation. It require courage and vision. For some the best way will be to create another company alongside established set ups and instil that with the new structure and culture. Running dual processes provides proof of the system and allows a legacy business to evolve gradually, mirroring its disruptor. Having a strategy for change is the only way to keep ahead of the competitor.

COLLABORATION

If we were starting to plan onboard customer service with a blank sheet, few would start from where we are today. The complexities and logistics of inflight service delivery are immense and make change seem overwhelming. However when you start thinking about how you can collaborate differently, collaborate better, to get a different solution, that is when change becomes possible. It requires new mindsets. Now is the time for that mindset. So why bother: Understandably many airlines and suppliers are in ‘protection mode', protecting the revenues they have, but that can be dangerous because it limits the art of the possible in terms of future solutions. Break down barriers and work together and you can rebuild with a new solution that is better for everyone. It’s a brave move but ultimately infinitely better than trying to reshape the old model to suit new times. Airlines do collaborate with their code shares and alliances, loyalty schemes now it is time to see how airlines and suppliers can collaborate. It is likely to be about working differently. The transition will be critical because one company trying to change everything isn’t necessarily going to work. We need collaboration and to review the distribution of profits. It is all about the bottom line along the supply chain , but could there be new ways to divvy up the pot slightly differently. Perhaps moving away from end to end services to deliver specialisation in different areas. These are the discussions that will radically change the industry. Michael Raasch, at Omnevo, says: “As certain factors come together, the entire market starts to change, Covid-19 has created a tremendous chance for industry transformation, to improve what we do and to do things differently. Day to day it is hard but when you look in your rear mirror and see where you've come from you realise progress is possible, people do change, their priorities and habits change and the businesses which serve them have to change too.” •

'Protection mode' is quite dangerous because it limits the art of the possible in terms of future solutions